U.S. DoJ sues Bank of America, citing alleged “fraudulent conduct”

We all knew that the Countrywide merger was ill timed compared to what was happening in the mortgage industry at the time. Most commentators on the subject talked about how this would become a potential problem down the road. Well that saga and case is being continued today.

The Washington Post mentioned that Countrywide loans were 9 times more likely to have “defects” in them compared to their peers. That is a pretty startling figure when you put this into to context of how much more, other bad and mos likely fraudulent behavior that was happening in the time leading up to the crisis point.

People need to go to jail and credibility needs to be severely restoring in our banking and other credit institutions. I love banks and the concepts they represent in a market system using other peoples capital to help get things done. But this brazen handling of these affairs should not be tolerated.

This types of companies already have inherently great advantages just because of the natural of their business, when you give people this type of responsibility, they need to take care and uphold its tenants no matter what. They can affect everyone lives and that is a big weight that have chosen to carry.

Reuters – Wednesday’s case, originally brought by a whistleblower, is the U.S. Department of Justice’s first civil fraud lawsuit over mortgage loans sold to the big mortgage financiers, which were bailed out in 2008.

It also compounds the legal problems that Bank of America Chief Executive Brian Moynihan faces over the second-largest U.S. bank’s disastrous July 2008 purchase of Countrywide Financial Corp, once the nation’s largest mortgage lender.

According to a complaint filed in Manhattan federal court, Countrywide in 2007 invented and Bank of America continued a scheme known as the “Hustle” to speed up processing of residential home loans.

Operating under the motto “Loans Move Forward, Never Backward,” mortgage executives tried to eliminate “toll gates” designed to ensure that loans were sound and not tainted by fraud, the government said.

This led to “defect rates” that approached 40 percent, roughly nine times the industry norm, but Countrywide concealed this from Fannie Mae and Freddie Mac, and even awarded bonuses to staff to “rebut” the problems being found, it added.